‘GST’s barking tagline, One Nation, One Tax, makes it a certain case of financial integration’

Bilal Handoo

Publish Date: Jul 23 2017 9:27PM

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Updated Date: Jul 23 2017 9:27PM

In a quiet street of Srinagar’s plush Sanat Nagar neighbourhood, two security personnel stand guard outside the residence of the retired judge lately tagged as “secessionist writer” for his views.

Sporting a red and black strapped sports shirt, Justice (retd) Hasnain Masoodi sits as a brooding man inside his manicured lawn in company of his Persian white cat.

The man who as a High Court judge delivered some landmark judgements like No Reservation in promotion, No Suo-Moto Power to SAC and non-erosion of Article 370 has lately become a ‘thorn in the flesh’ for his take on the controversial Good and Service Tax (GST).

As the cat came out of his table, the 1954-born retired judge from Khrew Pulwama said the GST implementation dealt a heavy blow to State’s sovereignty besides the biggest-ever assault on the state’s autonomy in the past four decades.

A law graduate from Kashmir University who had his Masters from Harvard University argued that the state has lost its law-making powers on taxation matters after the GST was implemented in State. The ex-judge, who held important positions in the district judiciary and High Court Registry during his 27 years of judicial career, said the Indian Parliament would now make laws on indirect taxes for J&K and the GST Council would decide on tax rates for the people of Jammu and Kashmir.

As a member of the ‘influential’ Group of Concerned Citizens of Kashmiri citizens, Masoodi advocated against the GST’s incorporation into the Constitution of J&K, arguing that extending 101st Constitutional Amendment in the state for the introduction of GST means surrendering the State’s powers. While constitutional amendments are ipso-facto applied to all other states, he said, these cannot be extended to J&K until and unless the state government gives its concurrence.

Masoodi who as the High Court Judge in 2015—a year before his retirement— ruled that Article 370 enshrined in the Constitution could not be abrogated, repealed or even amended tells Kashmir Ink how J&K has lost its political sovereignty along with its fiscal powers soon after implementing the GST.

Despite all the fuss and froth, the GST is now a law in Jammu and Kashmir. How do you see it now when the controversy over it refuses to die down?

I see it quite a deadly blow to J&K’s special constitutional status. By extending 101st Constitutional Amendment for the introduction of GST in the state, the present dispensation has eroded our autonomy. And this was done despite the civil society members alerting the State government that GST would pose a grave threat to our special positioning in federal structure of India.

Are you saying that the PDP-BJP government was hell-bent upon implementing the contentious ordinance in the disputed region?

All I am saying is that the GST is a legal tool available to Centre to achieve its old dream of centralization of decision making power. Thing is, the state government passed it as some kind of need to achieve the economic benchmarks, which I believe is a tad crass.

Fact remains that even the world’s largest economy America does not have a uniform tax regime like GST. Every US State is free to levy and collect tax on commodities and has its own tax regime with a number of indirect taxes. The absence of uniform indirect tax on commodities, a single tax rate or identical exemptions across the country has not stood in the way of its economy to flourish.

If that is the case, then why State government felt so compelled to pass it?

I may not be able to comment on the why part of it, but let me tell you, this GST regime was not even possible within India without an amendment in its federal structure. So, basically it’s an amendment in the Constitution of India, which doesn’t apply to the state of Jammu and Kashmir without the concurrence of State Assembly.

Under Section 5 Constitution of Jammu and Kashmir, whatever isn’t under the purview of Indian Parliament is within the powers of State Assembly. It is reverse in case of the Indian states. We call its residuary powers.

Now, by introducing this GST, these residual powers of State have been taken away. It has direct bearing on our fiscal and political autonomy. That’s why the GST is a political move in garb of so-called economic reforms.

Earlier, the whole taxation business – sales taxes and all other taxes – collectively called indirect taxes, would fall under the domain of State Legislature. They could legislate on it, decide on the tax rates or tailor its own tax policy.

But now with GST, we have to deposit these taxes with Centre, which can fix our rates and prices. It’s like others calling shots on your resources. This is a clear assault on our special status.

But the Finance Minister Haseeb Drabu, or for that matter, Chief Minister Mehbooba Mufti is saying that they have taken special care of State’s Special status while implementing it.

They are misleading the people of Jammu and Kashmir. See, in the first place, they relied on the Section 3 of the Presidential Order. Like I said, before extending any law to J&K, it needs concurrence of State Assembly, implying that without its permission, the law cannot be extended to the State.

When in 1977, 42th Amendment was made in Indian Constitution to undo whatever was done during Emergency, that Amendment wasn’t implemented in J&K. It had many problems and then State government decided against implementing it.

That means government has a say to check any political fallouts of any law. So, when the present dispensation initiated the debate before implementing GST, they should have entertained all those views before going ahead with it.

So the government had a power to say no?

Of course! As per the latest presidential order in context of Jammu and Kashmir, the President of India can even apply the constitution provisions in a modified form here. It may read differently in rest of the India, but it also reads differently here because of our unique constitutional relationship with the union of India.

And this takes us to the Section 5 of J&K Constitution, about which the government made much noise lately, saying that they have kept it intact.

First, let us assure ourselves, we don’t need any guarantee from President of India that the Section 5 is or shall remain intact. It’s a part of our J&K constitution and is beyond the amending power of State Legislature.

Apparently to put thrust on this point, the Section 3 was carried in the Presidential order, which is merely a statement than any constitutional provision. This statement was incorporated in the order to silence the voices having reservations against it.

But is the Section 5 of J&K’s constitution still the same after GST implementation?

Like I said earlier, what cannot come under the purview of Indian Parliament can come under the State Assembly under this Section. But we need to understand that the Section 5 doesn’t define the absolute jurisdiction of the state’s legislation and execution powers. It actually defines our powers with reference to some other power. And once you increase that power, the Section 5 stands eroded.

With this GST, the state government has increased such powers to Indian Parliament and thus eroded the very essence of Section 5. And now, the government is sending good feelers about its supposed safeguards.

But the question remains, if the Section 5 is intact as claimed by State government, then why do we need some special constitutional provisions under the presidential order to safeguard it?

In point of fact, the government wants to give an impression that everything is hunky-dory with GST in J&K, which isn’t the case.

So that means, now Indian Parliament will decide matters for us?

After the inclusion of the latest constitutional provisions, yes, it will.

Doesn’t that vindicate Arun Jaitely who lately said that with GST, Syama Prasad Mookerjee’s dream of Kashmir’s integration into the union of India stands fulfilled?

See, Arun Jaitely is a learned lawyer. He doesn’t make statements for the heck of it and refrains from making emotional statements. We have to accept whatever he said on GST and Kashmir. He has better understanding of the law and impact of constitutional provisions on Autonomy and Article 370.

But despite alerting the State government beforehand, why was Civil Society not taken into confidence?

When GST was still being debated in the State, the civil society suggested that J&K can have an alternative model with our own taxation model, which can be linked to GST. Even the visiting union finance minister Jaitley said in Srinagar that it was upto the State to decide upon it.

But everything changed ten days before its implementation. All of a sudden, there was a lot of noise in favour of its implementation. And that noise rose despite no sign of coercion cropping up in those GST debates.

Since you were also part of those debates, what triggered that noise?

Let me tell you, those GST debates were all hoax. An official deadline had already been set to implement it. The government was just buying the time and ensuring to take everyone on board. But when so many viewpoints went against it, in desperation that noise was created.

Many rational voices tried to argue that the GST will nullify the State’s control over indirect taxes that accounts for nearly 80 percent of state resources. In past even BR Ambedkar had fought against GST implementation in India after sensing how it threatened to undermine the State’s position and create the Centre’s tax monopoly.

If it’s a clear undoing of the State’s fiscal autonomy, then why is the government tomtoming the GST extension as an achievement?

It might be there because some see it as a step toward reforms, but since it gives Centre a hand in the huge resource base spanning over some thousands of crores available to the State in the form of indirect taxes, one doubts its objectives. With GST, Centre is in direct control of this vast tax base.

Compared to indirect taxes, direct taxes were already available to Centre in the form of income and corporate taxes. And since they don’t account for much resource, the move has now relieved big business houses from big taxes in a bid to safeguard corporate investment. Otherwise the corporate was expected to pay huge taxes as is norm in countries globally.

So, in a way, it is complete financial integration of Jammu and Kashmir with the union of India?

Obviously. The GST’s barking tagline, One Nation, One Tax, makes it a certain case of financial integration in a unitary form. It has made J&K dependent on Centre as it has to pool everything in its kitty. Now, in terms of 269-A, Centre will even decide the State’s share.

In a way, it’s a direct assault on Kashmir’s fallback system, which would help sustain the State during the tougher times. And given our special constitutional link with union of India, GST is an extra assault and tool to curb the State’s self-sufficiency.

Remember, taxation power is an important component of autonomy , which GST has taken away from us. If you take this power away, you chip away at the autonomy.

Let’s understand it this way. If my legislature has a power to impose taxes, inherit in this power is to give respite to a particular sector, or fix the rate for it. Say tomorrow government will make Kani Shawl tax-free in a bid to revive it. It was part of our tax policy and connected to our political autonomy as it can decide where and how we can mobilise our resources.

Now, everything will be decided by the GST council. A few days back some minister in the ruling PDP-BJP government was congratulating the people on tax relief in almonds and walnuts. But he failed to inform the people that the decision wasn’t taken by his government, rather by the GST council.

But then Finance Minister and his aides and advisors are hailing it as a great triumph for the government.

Let the Finance Minister first tell people how they can decide on the tax rates and tax exemptions now when the GST has been implemented in J&K. As a civil society, we try to remind him quite dispassionately about his earlier take on the GST as is clear from his write-ups and speeches. Before becoming finance minister, he was against it. And now, he vouches for it. Why this change in heart? And besides, what kind of “social reform” is this when we have lost our say.

And yet, the government want us to celebrate the so-called safeguards they claim to have made to protect our special status! That is simply outrageous!

But the present dispensation often argues that nothing much has been left in State’s special status to safeguard?

It’s just passing the buck. Anybody who did wrong must be taken to task. And what happened in past must not drive our present actions. Since Article 370 came into force, there have been over 50 attacks on the autonomy; most of them with active connivance of local politicians who acted more as collaborators than the so-called public representatives.

After this GST bill was passed last September, the State government should have generated a meaningful debate about it to reach at a better consensus. But now, even Service Tax – a huge chunk of tax – available with the State has gone.

Are you saying the government deliberately delayed public debate about GST to pass it?

It certainly appears the case.

So now when the GST is very much a reality, what are its possible political fallouts?

Well, there are instances when this GST was used to tighten the noose on the states for not performing up to the mark. Thing is, the PDP-BJP government had a power to say no to it. But instead they misled the people, saying that there was no escape from it.

Even if the government had to implement it, it would have done it on Quebec model, EU model or a model where State does not lose its exclusive power to legislate with regard to indirect taxes, to levy, administer and collect tax and lose its fiscal and political autonomy. The model put forth in any case is to be placed in public domain for a thorough discussion at all levels.

Unfortunately, the State government rushed to implement GST by simply thrusting it down the throat of people of J&K, enjoying limited constitutional relationship with the union of India.